CreditCardCo Blog

Despite the good news in the financial sector, it appears foreclosures are increasing yet again in close to three dozen states.

February saw a startling 10 percent increase in foreclosures with Nevada reporting a high that it is reminiscent of 2009.

This, according to Realty Trac, has many wondering whether credit card delinquencies will begin following student loan defaults and the increase in foreclosures.

Plus, TransUnion is saying it expects credit card late payments to begin rising soon, as well.

Triple Digit Increases

These increases are being seen in 32 states and 16 of those states, they’ve risen for the past year. In fact, some states are reporting triple digit increases – and those numbers could begin to increase as well:

Nevada up 334 percent

Maryland up 319 percent

Washington up 172 percent

New York up 139 percent

In some states, concerns are that the double digits could soon climb into the triple digits. New Jersey is one example with a 70 percent increase. This is an alarming realization and one many were unaware of. Worse, it’s one those involved in the Independent Foreclosure Review wish wasn’t unfolding.

For some time, these foreclosure starts had been on the decrease and comparing February 2012 and February 2013, there still is a 25% difference for the better. Even still, from January and February 2013, foreclosures increased by 2%

Florida

Florida is also particularly worrisome as it has beat even Nevada over the past six months. For every 282 housing units, one is in or has been in foreclosure in recent months. The state’s cities also account for seven of the nation’s 10 highest metro foreclosure rates thus far this year. Several cities are getting higher numbers than others, though, including Daytona Beach and Miami. It would appear northern Florida, for the time being anyway, isn’t feeling the degree of repercussions their neighbors to the south are feeling.

Independent Foreclosure Review

So what about the more than 4.2 million borrowers across the nation who are eligible for payments under the settlement tied to the Independent Foreclosure Review? Most have received notices from banks, lenders and the company handling the details in the mail. The problems being reported, however, are that they’re low on information and absent of checks. Rust Consulting who’s handing the notices and payouts, sent those notices out earlier this month, according to a presser from the Federal Reserve. According to those notices, however, are statements that it will be awhile before the checks are forwarded. In many cases, there are suggestions that there may be paperwork left to complete. Rust Consultant has printed a phone number on the card for those wishing to discuss their unique situations or for more information.

Remember, the $9.3 billion agreement between regulators and at least 13 mortgage services settles those instances where improper foreclosure actions were found, from inaccurate or otherwise shoddy paperwork to wrongful evictions. These happened in 2009 and 2010 and was only rectified in recent months and essentially put a halt to the Independent Foreclose Review of thousands of files from the 13 servicers, including several banks, after more than a year and a half and at a cost that easily surpassed $2 billion. And that work continues – those numbers could grow further.

Lenders and Servicers

It should be noted that the next phase of the Independent Foreclosure Review process continues for those homeowners with mortgages from EverBank/EverHome Mortgage Company, Financial Freedom (OneWest), GMAC Mortgage, and IndyMac Mortgage Services (OneWest). The banks and lenders who are shouldering the payouts include the biggest financial names in the industry. Those include Bank of America, Wells Fargo, JPMorgan Chase, Aurora, Citibank, Goldman Sachs, HSBC, MetLife Bank, Morgan Stanley, PNC, Sovereign, SunTrust and U.S. Bank.

For many, it’s too late. And, too, the fact that Fed Chairman Ben Bernanke said earlier this month in congressional testimony that the reviews were moving slowly and not much progress had been made isn’t helping matters. He also said that “we will have checks going out to borrowers in just a few weeks.” Of course, that’s not happening either as a few weeks have already passed and there’s been no further updates. Borrowers who have received these notifications reiterate the lack of details and the disappointment that the cards really provided no kind of update at all, despite promises from the Office of the Comptroller of Currency that they would provide accurate and complete follow up details.

Consumer Confusion

One consumer said,

I got a card from Rust Consulting today saying that I was eligible for a payment but it didn’t state how much…It also said that a check or paperwork asking for additional information will be sent in 4-8 weeks.

No one knows the structures of the payments, what the compensation will be, how it’s calculated and what to do if it’s too late for loan modifications. They have been told the compensation ranges from hundreds of dollars up to $125,000, based on the seriousness of the wrongdoing by the mortgage servicer; it’s also been announced the settlement will pay out in total $3.6 billion in cash payments and another $5.7 billion in other assistance to borrowers, such as loan modifications and forgiveness of deficiency judgments.

Foreclosures Continue

Things are only growing more confusing, too. Even as these notices were being prepared and mailed, there was one foreclosure filed for every 849 homes or housing units in February alone. It makes it difficult to justify the so-called “good news” that the economy is on the mend. The fact that so much varying criteria is used makes much of the information moot as far as consumers are concerned. Meanwhile, there’s more supposed ‘good news’ as many in the realty sector are citing information that suggests the American foreclosure “inferno” has been “effectively contained and should be reduced to a slow burn in the next two years.”

This, from Daren Blomquist, vice president at RealtyTrac, isn’t giving anyone peace of mind, especially considering the latest numbers that show foreclosures are rising in those thirty-plus states. Even Blomquist acknowledges that,

But dangerous foreclosure flare-ups are still popping up in states where foreclosures have been delayed by a lengthy court process or by new legislation making it more difficult to foreclose outside of the court system.

Foreclosures will likely continue to rise in those, and possibly other, states in the coming months and as one analyst said, will likely end up as bank repossessions or short sales before the year is up.

For now, the Federal Reserve is following up on worries that scams are overtaking the process. It sent out a warning this week encouraging consumers to pay close attention to the possibility of scam artists approaching them,

Beware of anyone who asks you to call a different phone number than the number above or to pay a fee to receive a payment under the agreement.

So what do you think? Are you trusting of the reassurances coming out of Washington? How much weight to do you give the still climbing student loan debt, the number of foreclosures on the rise and the new signs that perhaps credit card defaults could be on the rise now too? Do you believe Americans are being misled by the government with their continued insistence that the U.S. has no debt problem? Let us know your thoughts.